Defaulted student loans stop showing on your credit report about 7 years after you default. Federal student loans default after 270 days of missed payments. Until then, your federal loans are in a delinquency status. So if you defaulted on your student loans 20 years ago, the loan and late payment history won't be on your credit report. But you'll still owe your federal student loans.
Federal student loans include Federal Family Education Loans (FFEL Loan), Direct Loans, and Federal Perkins Loans.
There's no statute of limitations for federal student loan debt. And because there's no statute of limitations, you're still subject to wage garnishment, tax refund offset, and Social Security benefit offset.
Private student loans usually default after you missed a monthly payment. Your loan servicer, however, may say your simply delinquent. They may not mark your loan as being in default until you're more than 180 days late. Either way, the late payments for your private student loan will remain in your credit history for about 7 years from the last payment.
Click here to learn When Do Student Loans Go Away
Private loans do have a statute of limitations. You may no longer owe your private student loan if you've defaulted and it's fallen off your credit report. The statute of limitations may have run out, and neither the loan holder nor a debt collector can legally demand payment.
What happens to your credit score if you pay off a defaulted student loan
Since your student loan is no longer on your credit report, paying a defaulted student loan should not hurt your credit score. And it shouldn't improve it either.
The loan isn't on your credit report. Paying it off won't put it back on your credit report.
Let me repeat it.
Neither the collection agency nor the U.S. Department of Education should contact the credit reporting agencies to put the loan back on your credit report.
You've paid the loan off. There's no need to report it to the credit bureaus.
Federal student loan borrowers usually find out they have an old student loan default when going through the home buying process. Their name pops up in the CAIVRS system, and they no longer qualify for an FHA mortgage.
Click here to learn How to Get an FHA Mortgage With a Student Loan Default
Loan rehabilitation and loan consolidation will put the loan back on your credit report
Most student loan borrowers have three options to get their federal student loan debt out of default:
- federal student loan settlement
- enter into the loan rehabilitation program
- apply for a Direct Consolidation Loan
As I shared above, a settlement likely won't put the loan back on your credit reports with Equifax, Experian, or TransUnion.
But completing the loan rehabilitation program or consolidating your defaulted student loan will cause your student loan debt to reappear on your credit reports.
What will that do to your FICO score? Will it ruin your good credit? I'm not sure.
But I do know that getting your loan out of default will send your loan to a new loan servicer. And the student loan servicer will contact the major credit bureaus to add the loans back to your credit report.
Will the past late payments and negative payment history be added back to your credit report?
No. But the new loan will start fresh on your report.
Click here to read this guide to When Student Loans Are Killing Your Credit Score
Can a defaulted student loan be forgiven?
There's no loan forgiveness for defaulted student loans. For federal student loans, you'll need to bring your loans back into good standing through loan rehabilitation or loan consolidation before you're eligible for loan forgiveness.
Most private lenders don't offer loan forgiveness even if your loans are in good standing. So they definitely aren't providing forgiveness for defaulted private student loans.